Internet Business Models

A while ago, I was trying to explain internet business models to a couple of friends of mine, who are part of the brick-and-mortar business world.

Some of the points I tried conveying are:

  • What makes internet business models work is economy of scale – the more customers you have, the more economical and the more profitable your model is.

  • Internet users expect things for free (search, mail, etc.), so advertising-based model usually works (via Adsense or sponsored search)

  • Subscription-based services are also common and popular (such as Flickr and 37signals’ products)

  • Due to the internet’s inherent nature, the barrier to create a global business is less.

  • It’s very easy to lose a customer to a competing portal. So, user engagement is important.

  • The brand is important. Mindshare, marketshare, and all that stuff.

  • Innovate or die?

Today, I came across this list of business models by Professor Michael Rappa that covers pretty much everything that is on the internet.

I’m looking for more articles on the subject that make it more clearer and easier for me to explain these things.

Update: I was wondering if the model of ‘Get Big Fast’ still works today. I think there are some hints of that in bloglines and which have an amazing number of users but do not have a business model (at least that is known to public) yet.

8 thoughts on “Internet Business Models

  1. paul graham has been writing a lot about start-ups lately.

    there the business model (if it could be called one) is:
    1. build agile web app that gets popular. have an “escape plan”.
    2. get bought by yahoo, google, ebay, msn, etc…

    previously the business model (if it could be called one) was all about floating on the sharemarket.

    so in the case of bloglines, they already got bought by ask jeeves. has VC funding but not too disimilar. but then is still being worked on i think, so not much can be said about it.

  2. Hi Swaroop

    Sorry for filling up so many comments but I am trying to punch in the correct link but in vain. The actual link has an underscore between why and outsource. I copied the URL as it is. After I submitted the comment, the underscore’s vanished.

    So here is a snipped URL

    Please send the above posts with dead links to their deserved place – Trash Can ! :-)

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